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I went to purchase some bread for a student potluck last night. The store's bakery had posted apologies about the price of bread, citing the rise in wholesale wheat prices. I knew prices were going up -- to be expected when the falling value of the dollar encourages exports, I thought. But I was shocked to pay almost $ 4 for a loaf of bread. So I began to wonder -- why? Is the effect of biofuels showing up already in food prices? What's happening?

Here's what I found in my brief review on how much bread I paid for bread. The United Nations Food and Agriculture Organization (FAO) Food Price Index during the last month is about 50% higher for all foods than a year ago -- led in large part by even greater increases in meat and grain prices, including rice, corn and wheat, "supported by a persistent, tight supply and demand situation'' Bloomberg report Unlike crude oil, wheat prices have not yet hit inflation-adjusted
highs -- that honor is left for the period of Soviet Union's desperate
wheat purchases during the 1970s. But they have increased 50% in the last 6 months.

The NY Times reported that the world’s wheat stockpiles have fallen to
their lowest level in 30 years, and stocks in the United States have
dropped to levels unseen since 1948. The Food and Agriculture Organization of the United Nations estimates that world wheat production will rise this year to nearly 664 million tons, from about 655 million tons — not enough to replenish stocks and push down prices. In December, the organization noted that high international grain prices were causing food shortages, hoarding and even riots in some places. The NYT reports:

The United States Department of Agriculture’s 10-year forecast, released Tuesday, sees the wheat shortage as temporary. Stockpiles were predicted to fall this year to 312 million bushels, from 456 million bushels, before rebounding to about 700 million bushels by the end of the decade.Higher prices “will encourage additional acreage and production,” the report said. Wheat plantings will rise to 65 million acres in the 2008-9 season, from 60.4 million this year, the Agriculture Department said, though it predicted the number would then fall because of competition from other crops. NYTimes story

So, we can expect a year or so of relief from these prices. And then? "Competition from other crops" -- does that mean biofuels? I'm still looking for an answer, so stay tuned.